In the United States, in particular, and in other countries, many financial and other identification cards are relatively simple magnetic stripe cards. In the past these cards have typically had the account number information, account name, expiration date and in some cases a “security code” included in legible form embossed or printed onto the exterior of the cards. Anyone can read this information and it may in many instances be misused if in the wrong hands.
The above forms of identification cards have also been found susceptible to theft and use in making fraudulent transactions. In many instances such cards are stolen and then an unauthorized user employs the card in making charges against the associated account. This is easily done at automated card reading stations at fuel stations, by phone, and at other merchants. This type of fraud may be referred to as “stolen card fraud”. Such fraudulent use may continue until such time as the card is reported stolen and the account associated therewith is inactivated throughout the card data processing system.
In addition to stolen card fraud there is also a sizeable amount of fraud that occurs by duplicitous, but rightful, account holders or users. In this type of fraud, sometimes called “account holder fraud” or “card holder fraud”, the card holder will purchase one or more items using the charge or debit card and then report the card as having been stolen.
The procedures for dealing with fraudulent transactions, and the difficulties associated with investigations, are such that much stolen card and card holder fraud goes by undetected without costly investigation, and without prosecution by government officials. Such investigation and prosecution are often not of high enough priority for these officials to take action. Some financial card issuers believe card holder fraud represents the largest segment of fraud involving these types of cards.
In an effort to prevent fraudulent transactions, many merchants will now ask for identification when a charge or debit card is presented as a form of payment. The merchant will typically ask to see the consumer's drivers license or some other suitable form of identification. The information provided on the consumer's drivers license is then used by the merchant in an effort to verify that the consumer presenting the card is in fact authorized to make purchases with the card. This verification process typically involves two steps. First, the merchant compares the signature on the card to the signature on the consumer's drivers license. After comparing the signatures, the merchant generally examines the drivers license photograph in an attempt to match the photograph to the consumer who presented the card.
Unfortunately, this process of requesting identification, and then comparing signatures and matching photographs to card users often proves unsatisfactory. For a variety of reasons, merchants and/or merchant representatives often fail to obtain proper identification from consumers who present charge and/or debit cards as a method of payment. Moreover, even when the merchant does ask for and receive proper identification (e.g., a drivers license) from the consumer, the process of verifying the signature and matching the photograph can be very difficult.
Merchants are not typically skilled at comparing customer signatures which can be highly variable. In addition, making such a comparison can be especially difficult in a busy retail environment, where the merchant may have a long line of customers waiting, and little time for studying and comparing the signatures.
In addition, the process of matching a drivers license photograph to a customer's face can prove to be a difficult task. The ability to make such comparisons varies from person to person, and many merchants and their staff have little skill in this area. Moreover, even for those who possess some skill for making such comparisons, many factors can complicate the task. For example, the drivers license and associated photograph can be several years old and therefore provide a poor representation of the consumers current appearance. Even in cases where a recent photograph has been presented, changes in weight, hair color, eye color (e.g., colored contact lenses), and/or cosmetic surgery can rapidly change a person's appearance, making it difficult to adequately match the photograph to the consumer. Because of such difficulties, other methods and apparatus for decreasing fraudulent transactions are needed.
Some problems associated with stolen card fraud and cardholder fraud have in part been addressed in some credit, debit and other types of identification cards, by requiring entry of a personal identification number (PIN) at the place of use on a key pad entry device which is typically located adjacent to a magnetic card reader. Such key pad entry devices are typically part of the card handling system and are often mounted on the “check-out” counter in retail establishments such as grocery stores. Such systems are commonly used by swiping or otherwise passing the magnetic stripe cards though a reading slot in the card reader. The user then uses the associated key pad to input the PIN. Such systems are also frequently used at automated bank tellers and at many retail merchant locations.
Although this approach has helped to reduce the problems of cardholder fraud and stolen card fraud it does not address the various situations where such key pad entry devices are not available. For example, such key pad entry devices are not available when a card is used to make purchases over the telephone and/or over the computer (e.g., “on-line” or over the internet). Presently, when making such purchases, a consumer may be asked to provide a security code, which is typically included in legible form, embossed or printed onto the exterior of the card. Unfortunately, the provision of such a security code does little to ensure that the consumer making the purchase is authorized to use the card, since the security code is readily visible to anyone in possession of the card.
Another problem associated with key pad entry stands adjacent to magnetic card readers is that such stands are generally in view of other people. Therefore, entry of the PIN may be observed by others standing in line. Additionally, more sophisticated techniques, such as using audio waves, radio waves, or imaging, may be used to capture this sensitive information. Such sophisticated techniques may be completely undetectable by the store personnel or customers being subjected to fraud or collection of information that can be used to commit fraud.
There has been resistance to adopting and using card readers with key pad entry stands with visible PIN inputs by many individuals due to the above and other security problems.
Additionally, the bulk of magnetic stripe card readers are not set up with an associated key pad entry stands and the majority of electronically processed transactions continue to be processed without use of any PIN entry by the card user due to the established procedures for processing such transactions. This makes fraudulent use of magnetic stripe financial identification cards easier with regard to both stolen cards and fraud practiced by cardholders as explained above.
In an effort to stem the costs of card fraud, there has been a substantial amount of development of financial cards that are called “smart cards”. Such smart cards typically employ an electronically programmable integrated circuit or circuits that have permanent memory. The smart cards are programmed for a particular user and account, and are difficult to alter for use in fraudulent transactions by others. This technology has been more widely adopted in European and some other foreign countries than it has within the United States. Since the United States has many magnetic stripe card readers, the newer technology smart cards have not solved the problems associated with striped cards and magnetic stripe readers.
A prominent disadvantage of smart cards is that they require a smart card reader that is specifically adapted to read the particular type of smart card being employed. The smart card technology that has been developed varies. There are a number of different types of smart cards with complementary smart card readers. The readers are not the same, and a correct type of reader is needed to read a particular type of smart card design. Since there are many smart cards with associated proprietary readers, this has deterred their acceptance in the United States and elsewhere. At this time there is no single standard for smart cards.
For these and possibly other or future reasons, the smart card technologies available have not been widely accepted for use as financial cards in the United States and many other countries that continue to use magnetic stripe reader technology. Accordingly, there are a very large number of merchants that continue to use magnetic stripe readers in making charge and debit account transactions. This continued use of magnetic stripe readers expected for many years despite the very large volume of fraudulent transactions being made. These fraudulent transactions not only cause costs to be incurred by merchants, they also cause costs to be incurred by the financial industry and insurance companies that insure merchants, banks and other industries against fraud losses associated with charge cards.
In view of these and other considerations, there remains a need for an improved portable identification card (e.g., a credit and/or debit card) and associated methods which will simplify the process of verifying whether a customer is authorized to use the card, provide greater convenience and security, and decrease risks of fraudulent card use.